How Do I Limit Stock Market Risks?
Many private investors are currently facing a puzzle. The safe harbor or checking account only casts off minimal interest. Experts therefore advise the money to invest in the stock market. But how can investors there simultaneously increase their money safely and with low risk?
Current situation for investors
With key interest rates just above the 0% mark, savings accounts with banks are no longer worthwhile, because there are also only just over 0% interest rates per year. In addition, the savers in Cyprus and Spain have already been asked to pay and subsequently expropriated by the state.
The logical consequence: if possible, only very small amounts should be parked on the bank so as not to end up even losing money. In addition, an annual loss in value through inflation can in no way be offset by interest on the savings account, or overnight money. Already now, savers pay extra – even if they do not get it as directly held as in expropriation.
Investing in the stock market
It is still advisable to invest a portion of your own capital in equities. It is important to rely on high-yield companies. Naturally, investors can do a lot wrong with the thousands of public companies. Therefore, even here, the risks can be limited when investors buy shares of companies whose value hardly fluctuates.
Nowadays, investors can simply search for high dividend stocks . At the same time, if you rely on solid companies from the US, there are some good investment opportunities there alone.
Price losses always have to be taken into account, but the first two have already regained ground after the energy turnaround. The other three titles also run very stable sideways to upwards.
So whoever invests in these companies has an annual dividend of around 5% on average. Of this, the withholding tax will still be deducted, but ultimately this gain is many times that of the safe harbor.
Protect against falling prices
Investors who invest part of their capital in, for example, DAX stocks can relatively easily hedge against falling prices, and thus limit their risk on the stock market. This is worthwhile in uncertain market phases with a derivative to a sinking DAX. A security is selected which has the DAX as the underlying and gains in value if the DAX falls.
Since most of the stocks are usually affected by a falling DAX, all DAX shares can be hedged in the securities account at once. It is important here to make the hedge is not too high and too risky.
A lever of, for example, 4 to 6 is sufficient to participate in the event of a reset accordingly. At the same time, however, this low level of leverage also leaves room for improvement if prices rise unexpectedly.
Private investors should not always have such a hedge in the custody account. The art of selling this insurance against falling prices also when prices turn up.
How do I limit risks on the stock market?
Scattering is important. In doing so, investors should not only buy stocks from one sector, such as the automotive industry. If you scatter widely, you secure your deposit solely, because not every division develops the same way.
It is also worth considering investing part of its capital in gold and silver . Although these do not yield direct returns, the precious metals have a lot of potential, and generally provide protection against loss of purchasing power.
So if you invest the majority in stocks, a little in precious metals, you can save a small amount for speculative investments. Either stock exchange recommendations can then be simulated or, for example, own trading ideas implemented by means of chart technology.
All in all, the risk in the stock market is manageable, if investors do not put too much on a map and know how they can earn even with falling prices.